TIDMGAW
RNS Number : 0299H
Games Workshop Group PLC
25 July 2023
PRESS ANNOUNCEMENT
GAMES WORKSHOP GROUP PLC
25 July 2023
ANNUAL REPORT
Games Workshop Group PLC ("Games Workshop" or the "Group")
announces its annual report for the 52 week period to 28 May
2023.
Highlights
52 week period 52 week period
to to
28 May 2023 29 May 2022
GBPm GBPm
---------------------------------------- --------------- ---------------
Core revenue 445.4 386.8
Licensing revenue 25.4 28.0
Revenue 470.8 414.8
Revenue at constant currency 447.3 414.8
Core operating profit 148.2 131.7
Core operating profit at constant
currency 131.9 131.7
Licensing operating profit 22.0 25.4
Licensing operating at constant
currency 19.9 25.4
Operating profit 170.2 157.1
Profit before taxation 170.6 156.5
Net increase in cash - pre-dividends
paid 155.5 79.3
Earnings per share 409.7p 391.3p
Dividends per share declared
in the period 415p 235p
Dividends per share paid in the
period 415p 285p
Kevin Rountree, CEO of Games Workshop said:
"We finished the year having delivered eight consecutive years
of Group sales and profit growth - in the period we reported the
highest level of sales and the most profit we have generated since
flotation 29 years ago. Our international team has been sensational
again, thanks to you all."
For further information, please
contact:
Games Workshop Group PLC investorrelations@gwplc.com
Kevin Rountree, CEO
Rachel Tongue, CFO
Investor relations website investor.games-workshop.com
General website www.games-workshop.com
The full 2023 annual report can be downloaded from the investor
relations website at investor.games-workshop.com
See the glossary for details on the alternative performance
measures (APMs) used by the Group. Where appropriate, a
reconciliation between an APM and its closest statutory equivalent
is provided.
STRATEGIC REPORT
Strategy and objectives
Games Workshop is committed to the continuous development of our
intellectual property ('IP') and making the Warhammer hobby and our
business ever better.
Our ambitions remain clear: to make the best fantasy miniatures
in the world, to engage and inspire our customers, and to sell our
products globally at a profit. We intend to do this forever. Our
decisions are focused on long-term success, not short-term
gains.
Let me go through our strategy part-by-part:
The first element is that we make high quality miniatures. We
understand that what we make may not appeal to everyone, so to
recruit and retain customers we are absolutely focused on making
our models the best in the world. In order to continue to do that
forever and to deliver a decent return to our owners, we sell our
miniatures for a price that we believe represents the investment in
their quality.
The second element is that we make fantasy miniatures based in
our endless, imaginary worlds. This gives us control over the
imagery and styles we use, and ownership of the IP. Aside from our
core business, we are constantly looking to grow our licensing
income from opportunities to use our IP in other markets.
The third element is that we are customer focused. We aim to
communicate in an open, fun way. Whoever and wherever our customers
are, and in whichever way they want to engage with Warhammer, we
will do our utmost to support them.
The fourth element is the global nature of our business. Our
customers can be found anywhere, and we seek them out all over the
world. They're a passionate bunch with an interest in science
fiction and fantasy. They're collectors, painters, model builders,
gamers, book lovers and much more. And while no two customers
engage with Warhammer in exactly the same way, they're all deeply
invested in the rich characters and settings of our IP.
To reach them, we have two key tools: our retail chain and our
digital content. In retail, we showcase the Warhammer hobby and
offer a fantastic customer experience. Our digital offering has
never been richer. Through warhammer-community.com and social media
we reach thousands of people every day, showing them the very best
aspects of the Warhammer hobby and inviting them to join our global
community of enthusiastic fans.
Our retail channel is supported by our own online store (it has
the full range of our products) and our independent stockist and
trade accounts across the world. These independent accounts do a
great job supporting our customers in parts of the world where we
either have not yet opened one of our stores or where it is not
commercially viable for us to have one. Our long-term goal is to
have all three channels (retail, trade and online) growing in
harmony. We will always have more independent accounts than our own
stores. Our strategy is to grow our business through geographic
spread, growing all of the three complementary channels.
The fifth element is being focused on cash. By delivering a good
cash return every year we can continue to innovate, surprise and
delight our loyal existing customers and new customers with great
products. To be around forever we also need to invest in both
long-term capital and short-term maintenance projects every year,
pay our staff what they have earned for the value they contribute
and deliver surplus cash to our shareholders. Our dedication and
focus should ensure we deliver on time and within our agreed cash
limits.
We measure our long-term success by seeking a high return on
investment. In the short term, we measure our success on our
ability to grow sales whilst maintaining our core operating profit
margin at current levels. The way we go about implementing this
strategy is to recruit the best staff we can. We look for those
with the appropriate attitude and behaviour a given job requires
and for those who are aligned with our principles and who are
quality obsessed. It is also important that everyone we employ has
a real desire to learn the skills needed to do their job and has a
great attitude towards change. To support them, we offer all of our
staff both personal development and skills training.
Our brands
We have originated and are in control of a number of strong,
globally recognised brands with their own identities, associations
and logos.
Our key consumer facing brand is 'Warhammer' - this unites all
aspects of the Warhammer hobby - collecting, building, painting,
playing, reading, watching, gaming, etc. in the worlds of
Warhammer.
We have two main universes/settings - our dark, gritty fantasy
sci-fi universe, which encompasses 'Warhammer 40,000', 'Warhammer
The Horus Heresy' and 'Necromunda' and our unique fantasy setting
that includes 'Warhammer Age of Sigmar', 'Blood Bowl' (albeit a
tongue in cheek parody) and, the soon to be released, 'Warhammer
The Old World'. We believe our IP to be among the best in the
world.
We continue to add to the depth of these worlds with an ever
evolving range of miniatures that we hope will keep hobbyists
engaged and excited for a lifetime.
The Warhammer settings are incredibly rich and evocative
backdrops. They're populated by more than three decades of
fantastical characters and comprise thousands of exciting
narratives. We are committed to making it easier than ever for
people to discover, engage with and immerse themselves in our IP.
Aided by a small, senior team we have already begun to find new
partners, and new ways to help us bring the worlds of Warhammer to
life like never before. Together, we'll continue to explore
animation, live action, video games and more. We'll present the
very best aspects of our rich IP, delighting audiences while always
ensuring we do no harm to our core miniatures business.
Business model and structure
We are a vertically integrated business. We design, manufacture,
distribute and sell our fantasy miniatures and related products.
These are fantasy miniatures from our own Warhammer 40,000 and
Warhammer Age of Sigmar universes. We are an international business
centrally run from our HQ in Nottingham, with 78% of our sales
coming from outside the UK. We have our two main factories, a paint
factory, two warehouse facilities, design studios and back office
support functions - all are based in or near Nottingham.
Design
We design all of our products at our HQ in Nottingham. Employing
c.300 people, the design studio creates all the IP and all the
associated miniatures, artwork, games and publications that we
sell. Annually, these specialist staff produce hundreds of new
sculpts, illustrations, rules, stories etc. enabling us to deliver
new products every week and continue to keep our customers engaged
and excited. In 2022/23 we invested GBP17.3 million in the studio
(including software costs) with a further GBP6.7 million spent on
tooling, the majority of which was for new plastic miniatures. We
are committed to investing in these areas at an appropriate level
every year.
All of our plastic miniatures are branded as Citadel Miniatures,
a mark with an unparalleled reputation for quality. It denotes both
a style and level of detail that we apply to both our own worlds
(Warhammer 40,000, Warhammer Age of Sigmar etc.) and those of
others, e.g. Lord of the Rings. Our resin miniatures, designed for
more experienced customers, are branded as Forge World and are less
widely available than their plastic counterparts.
Many customers love personalising their miniatures and our
Citadel Colour paint range, brushes and accompanying painting
system are designed to help everyone from the complete beginner to
the most experienced painters in the world achieve great results.
In the pursuit of ever better, we continually develop new types of
paint and ways of using them. The result - our paints are used the
world over. And for painting more than just our miniatures.
When not interacting with our miniatures, many customers enjoy
reading stories set in our rich and immersive worlds. Under our
Black Library imprint we publish new titles every year, from short
stories and audio dramas through to full length novels and audio
books. These we make available in physical bookstores, third party
digital platforms and through our own retail and other specialist
stores.
Manufacture
We are proud to manufacture our product in Nottingham which is
the centre of expertise for our global business. It's where we
started and where we intend to stay.
Logistics
Our product is distributed from our main warehouse at our HQ
(Eurohub) or our warehouse (EMG) approximately 25 minutes away.
These warehouses supply our two hubs; one in Memphis, Tennessee and
one in Sydney, Australia. Between these four warehouses, we are
able to directly supply our independent retailers, our own retail
stores and fulfil our online orders.
Sell
Our core revenue is generated via three channels, our own stores
'Retail', third party independent retailers 'Trade' and our online
store 'Online'. We also sell via our licensing partners. We support
these channels and activities via our digital and marketing
team.
Retail - our stores provide the focus for the Warhammer hobby in
their geographical areas. Our stores only stock Games Workshop
product. They are where we recruit the majority of our new
customers. To do so, the stores don't offer the full range of our
product, only starter sets, new release products and the
appropriate extended range. At the period end, we had 526 of our
own retail stores in 23 countries. We have 399 single staff stores:
small sites, each one operated by only one store manager. We also
have 127 multi-staff stores, which, like our single staff stores,
are constantly reviewed to ensure they remain profitable. If not,
they will probably be converted to single staff stores.
Trade - we sell to third party retailers under closely
controlled terms and conditions. Independent retailers are an
integral part of our business model helping us to sell our products
around the world and importantly in areas where we don't have our
own stores. Games Workshop strives to support those outlets which
help to build the Warhammer hobby community in their local areas.
The bulk of our sales to independent retailers are made via our
telesales teams based in Memphis, Nottingham and Barcelona. We also
have small telesales teams in Sydney, Tokyo, Shanghai, Singapore,
Hong Kong and Kuala Lumpur. In 2022/23 we had 6,500 independent
retailers (2022: 6,200) in 71 countries. We strive to deliver
excellent service, operating in 20 languages covering all time
zones. Independent retailers sell from their physical stores as
well as their own online web stores.
Online - sales via our own web stores. All of our retail stores
also have a web store terminal that allows our customers to access
the full range from within the store. Our web stores are run
centrally from our HQ.
Licensing - we grant licences to a number of carefully chosen
partners. This allows us to exploit our IP to broaden the presence
and brand exposure of Warhammer around the world, often entering
new markets such as media and entertainment. It also allows us to
generate additional income. Currently, the majority of this income
is generated by video games sales in North America, the UK and
Continental Europe.
Marketing - keep us customer focused. This team acts as the
bridge between our other business areas, ensuring we have a joined
up approach between product (design to manufacture) and sales.
Marketing spend a lot of time listening and developing a two way
dialogue with our customers to make sure we keep their needs at the
forefront, championing the Warhammer hobby around the globe and
injecting our content and communications with a real sense of
passion and fun.
Structure
We control the business centrally from our HQ in Nottingham; it
is where the majority of people with experience and knowledge of
running our business work. I have put in place a flat structure:
the people with senior responsibility, that make all of the big
decisions, report directly to me. There were a few changes during
the year to help us deliver our operational plans.
I implemented a new structure during the year which is split
into two main teams: an operational board team and a senior
management team. The operational board members are: the chief
financial officer, a global IP and product design director, a
global business to business (B2B) sales and marketing director, a
global manufacturing and supply chain director, and a creative
media director. I represent our own sales channels at the regular
reviews.
Our global IP and product design director is responsible for our
Warhammer design studios (miniatures, books and box games,
specialist systems, hobby product, our publishing business - Black
Library, and creative approvals for third party licences). They
ensure any content that is produced, whether physical or virtual,
truly represents our IP. They also support me in exploiting our IP,
alongside our creative media director.
The responsibility for our trade sales is with our global B2B
sales and marketing director who also manages the marketing team
for all sales channels.
Reporting directly to me, our retail chain is split between two
retail territory managers, one for North America and Asia and one
for the rest of the world. Our online store (our biggest store) is
the responsibility of our rest of the world retail manager, who
also manages our biggest physical store, Warhammer World.
The global manufacturing and supply chain director manages the
three factories in Nottingham and our four main warehouse
facilities in Nottingham, Memphis and Sydney as well as a
merchandising team to support the sales channels.
Our operations and support structure includes the chief
financial officer for Games Workshop who is responsible for
accounts, HR, legal and compliance, and IT. They also support me in
exploiting our IP by managing the licensing team.
The senior management team comprises the members of the
operational board together with our global head of IT, two retail
territory heads, our Group company secretary/general counsel, two
HR managers (covering support and advisory, and recruitment and
development). In addition, my executive assistant helps me by
running a team who support the day to day running of the teams
above.
Key performance indicators
The boards and management team use a number of key performance
indicators to provide a consistent method of analysing performance,
in addition to allowing the boards to benchmark performance against
our forecast. The key performance indicators utilised by the boards
can be split into key financial performance indicators and key
non-financial performance indicators.
Our key financial performance indicators are:
Monthly and year to date core business sales growth by
channel
This measures the core business sales growth achieved in each of
our core channels on a monthly and year to date basis.
Monthly and year to date core gross margin
This measures the core gross margin achieved on core sales after
taking account of the direct costs, depreciation of manufacturing
equipment and the costs of shipping our product to customers/stores
on a monthly and year to date basis.
Year to date core operating profit percentage
The ratio of core operating profit against core revenue, as a
percentage. This is considered to be a measure which reflects sales
and costs under our direct control.
Monthly and year to date core operating profit
This measures gross profit less operating expenses for the core
business on a monthly and year to date basis. This is considered to
be a measure which reflects sales and costs under our direct
control.
Year to date licensing revenue
This measures licensing revenue and cash earned from licensing.
These measures reflect revenue which is not under our control.
Our key non-financial performance indicators are:
Number of own stores by territory
This measures the number of our own stores which is an indicator
of our global reach.
Number of ordering stockist accounts by territory
This measures the number of trade outlets that have ordered from
us in the last six months. It is an indicator of our global reach
and the health of our trade account base.
Customer engagement
We measure this through our owned content channel
Warhammer-community.com and reach delivered through our social
platforms.
Shareholder value
We believe shareholder value is created, primarily, by not
destroying it. We have no intention to acquire other companies, nor
to dispose of any of those we own.
We return our surplus cash to our owners and try to do so in
ever increasing amounts. A 'working cash buffer' of three months'
worth of working capital requirement has been set aside alongside
six months' worth of future tax payments before deciding how much
cash is truly surplus for the purpose of declaring dividends.
Review of the period
Another record year for Games Workshop - the business and the
Warhammer hobby are in great shape.
It has been another exciting year. After a relatively slow start
for us, we finally got into our rhythm and have delivered
profitable sales growth in all of our three channels, and in all
major countries (excluding Russia, where we stopped selling in
March 2022). It was great to see the team effort in the second half
focused on executing our operational plan rather than allowing
ourselves, at times, to get distracted by external events out of
our control. There were lots of details to get right everywhere
and, as always, the global team has delivered again. We have
controlled our costs well and improved our gross profit and as a
result our cash flow has been great; allowing us to return GBP136.5
million to our owners during the period. Our staff have once again
been amazing; thank you and well done to you all.
Our operational plan is designed to give us the best chance to
succeed every month so it was rewarding to see us finish the period
with seven months of consecutive Group core revenue growth against
the prior period. Core revenue growth for the period at constant
currency finished Retail +16.9%, Trade +9.3% and Online +3.0%.
We have been focused on recruiting new customers, improving our
customer service and at the same time aligning our stock
forecasting and delivery to our ambitious operational plans:
getting the right products to the right locations at the right
time. Easy to say but by its very nature forecasting (trying to
predict the future) is an impossible task to actually get right. We
have been investing in factory and warehouse capacity and our new
facilities are starting to go live. We are now improving our end to
end processes and our communications about our product ranges with
our customers, retail store managers, trade teams and customer
service teams. Our new forecasting team still have some hard work
to do; we don't want to underestimate demand but too much cash tied
up in stock is not great either.
We also take an ambitious approach to aligning ourselves with
broader stakeholders' opinions on how we run Games Workshop. We
have, in the period reported, continued our focus on environmental,
social and governance (ESG) areas. The board, operational board and
our senior managers carried out a thorough review of our carbon
footprint which was supported by third party specialists. In
summary, we have committed to significantly reducing our scope 1
and 2 emissions over the next 10 years. We have a detailed plan and
so we believe it is achievable.
Morale at Games Workshop is upbeat: we are doing OK but
inflation and the related higher interest rates are clearly an
ongoing concern for most of our staff. During the period, we
continued to look at relevant ways to support our staff. We have
increased pay across the Group by on average 4.9% (supporting fully
the increase in UK national living wage to GBP11 per hour) and
following a review of our family leave entitlement, our maternity
and adoption leave entitlement has increased from 6 weeks to 18
weeks at full pay. Paternity leave will increase from 1 to 2 weeks
at full pay. We will continue to keep staff benefits under
review.
In line with our Group Profit Share Scheme, and for their
outstanding contribution to these results, we have paid each member
of staff GBP4,000 this period (2022: GBP3,500), in total GBP11.6
million (2022: GBP9.9 million).
Design
Following the successful relaunch of Warhammer The Horus Heresy
in June 2022, we have released a steady flow of new plastic
miniatures, for what was originally a resin only range, allowing
ever more trade accounts and hobbyists to access this part of the
Warhammer hobby. February saw the release of the novel 'The End and
the Death', the first part of the climactic finish to the legendary
storyline behind this miniatures range which began in 2006 and over
60 novels ago!
The second half of the year also saw some fantastic new
miniatures and a dramatic storyline leading into the new (10th)
edition of Warhammer 40,000, released in June 2023. Fair to say
that excitement for the new edition is high.
Often in the shadow of Warhammer 40,000, Warhammer Age of Sigmar
continues to grow steadily with launches in the period for
Seraphon, Slaves to Darkness and the wonderfully named Gloomspite
Gitz, all being well received.
In December we released 'The Battle of Osgiliath', a box set
based on one of the seminal scenes from our licensor's 'The Lord of
The Rings' movies. While a modest part of our business, it's great
to see it still going strong, 22 years since its first release.
We continue to scour the world for those individuals who want to
be part of making the best fantasy miniatures in the world and this
year we welcomed several designers from South America. I'm always
amazed that people are prepared to move to the other side of the
world to be part of what we do. The Warhammer hobby truly is
something special.
On a sad note, we made the hard decision to make our Russian
language translation team redundant. We held off as long as we
could but with the war in Ukraine sadly showing no signs of ending,
we had to accept the reality that we won't be in a position to
provide hobbyists in Russia with the offer we want, any time soon.
We wish all the individuals well and our thoughts go out to those
impacted by the horrendous events in Ukraine.
Manufacturing
Our manufacturing team has remained focused, as always, on
producing the best fantasy miniatures in the world. They have
retained a default 24/5 shift pattern keeping our overtime to a
minimum and voluntarily working weekend shifts, but only as
required.
All three Nottingham factories have operated in line with our
forecast and expectations throughout the year. We decided not to
expand our manufacturing footprint further during the year, instead
focusing our energy upon improving our capabilities and
efficiencies using the world class equipment and people we have. A
range of projects have been progressed focusing on material
efficiency as well as tool design and machining. These projects
will allow us, in the future, to produce more with less. We have
also completed a suite of refurbishments to upgrade our facilities
for staff.
Work towards obtaining a China Compulsory Certificate (CCC) was
completed as expected. Our factories successfully passed follow up
audits and we now have all relevant core products accredited for
sale across China.
The land in Nottingham, purchased in 2020, has been partially
developed with the building of an injection moulding tool storage
unit and the creation of c.100 car parking spaces. We continue to
plan ahead and are ready to build an additional manufacturing
facility on this land when it is required. We currently have spare
capacity.
Production staff costs decreased in the period as we reduced our
use of temporary agency staff, with costs decreasing by GBP1.6
million to GBP10.4 million, reducing to 2.3% of core revenue.
Warehousing
Having overcome significant technical challenges in late 2022,
the warehouses in Nottingham and Memphis ended the financial period
running more efficiently. The priority for both of these sites
going forward is to leverage the new equipment and systems, to
reduce operating costs and maintain customer dispatch times. Cross
border shipping remains the key issue for orders into Europe. We
continue to review and consider practical and financially viable
solutions to tackle this where possible - this could involve
setting up a warehouse facility in Europe.
North America
Whilst new systems and automation have been in place all year,
it has not been until later in 2022/23 that software updates and
modest improvements to our old back office systems allowed the team
to use them fully. During the 2023/24 financial period, we will
decommission our legacy warehouse system and equipment. The back
office systems will be replaced as part of an ongoing systems
improvement plan.
UK
Finally, after a few teething problems, the EMG facility took on
fulfilment of all UK and European retail, trade and international
shipping. Operations for all but our UK and European online order
fulfilment have now been running out of EMG for a number of months
with all relevant operational staff transitioned from our Lenton
site. Our Eurohub warehouse is being converted to become our
dedicated materials and component warehouse. The close proximity to
the factories makes this the ideal site to offer a more
just-in-time service to our three factories. At the time of
writing, the component and material operation is transitioning from
EMG to the Eurohub component warehouse, this should be completed by
the end of the summer. Online fulfilment is making the reverse
transition heading towards EMG. We are anticipating a few final
teething issues.
Australia
With sustained sales growth in Australia, options to increase
our warehousing capacity are currently being explored. One option
being considered is moving to a bigger leased site close to the
existing location.
Total warehousing costs have increased by GBP5.6 million to
GBP25.9 million, the majority of the increase being across local
authority rates (+GBP1.1 million), depreciation (+GBP1.0 million),
staff costs (+GBP1.2 million) and consumables costs (+GBP0.7
million); as a percentage of core sales, warehouse costs have
increased from 5.2% to 5.8%.
Service centres
As we grow there are just more things to process and join up.
During the year our teams delivered another herculean effort
processing more transactions than ever. We continue to invest in
our IT team to deliver our systems improvement plan. It is another
important year ahead for this relatively new team. There are really
too many things to write about that our silent backbone does; the
key highlights during the year were ensuring the opening of the new
Trade office in Barcelona happened on time and within budget from
both a people, finance and systems perspective as well as ensuring
the receipt of all of the outstanding VAT from the French tax
authorities. We thank them all for their considerable efforts and
for their commitment to continuous improvement.
Customer focused
Our goal remains to reach, engage and inspire Warhammer fans
everywhere. We continue to focus our efforts on six of our own key
areas:
Our stores
For decades, the staff in our retail stores have worked
cheerfully and relentlessly to offer great customer service and
more importantly recruit ever more new customers into the Warhammer
hobby. Our stores continue to be the best place to start your hobby
journey with us. We continue to offer free introductory
experiences: receive your first model, learn how to build and paint
it, and play an exciting game with store staff. Our Warhammer
Alliance schools programme has an active c.6,000 schools signed up.
Designed to support young people improve their engineering, arts,
and maths skills, a Warhammer club is a great creative outlet that
will easily fit into any development offer for young people aged 12
and above. For older students (14+) in the UK, we also have the
Warhammer skills development programme that guides them through the
hobby and works towards achieving the Duke of Edinburgh's
Award.
Warhammer Community
Warhammer-community.com remains the cornerstone of our online
presence. The best place to come for all the latest news from the
41st Millennium and the Mortal Realms. During the year, the team
again put out thousands of pieces of content to engage, inform and
inspire Warhammer fans globally.
My Warhammer
This single login gives access to our webstores and related
apps. As at the period end, we have 427,000 active users. To better
track engagement we have defined an active user as someone who has
engaged with us online in the last six months.
Warhammer+
Our subscription service for Warhammer fans is approaching its
second year. It is a new way to explore the worlds of Warhammer.
You'll find original animations and shows, access to Warhammer
40,000 and Age of Sigmar apps, a digital vault archive packed with
decades of lore and magazines, subscriber offers, and exclusive
miniatures.
The exciting content delivered through Warhammer+ will remain an
integral part of our digital offer and how we share our IP.
Subscriber numbers are currently 136,000 (2022: 105,000).
Email
Our email campaigns continue to be one of our most effective
methods of communication. Subscriber numbers, defined as people who
opened one of our emails in the last six months, at the period end
were 531,000 (2022: 455,000).
External events/social media
To broaden our reach to ever more potential enthusiasts, we
continue to attend many of the largest tabletop third party events
in the world and post huge amounts of content on our popular
official social media sites. This included some of our best
animation ever; including news of the new edition of Warhammer
40,000, supported by our latest trailer.
The network of local clubs, schools and group events, plus the
activities of our trading partners and our own 500+ stores, have
helped local Warhammer communities grow offline... in the real
world.
Licensing business
Warhammer IP is rich, vast and endless so as we do more
projects, it's important that we are focused on exploiting it all
and that its representation continues to be respectfully
maintained. During the period we transferred the approval process
for managing our IP with licensing partners to the management team
at the heart of Games Workshop, our Warhammer studios. This will
ensure its representation stays true to its origins.
Our strategy is to exploit the value of our IP beyond our core
tabletop business, in multiple categories and markets globally. We
intend to ensure Warhammer's place as one of the top fantasy IPs
globally. The main areas of focus are:
Entertainment
Our contract negotiations with Amazon Studios continue, so
within normal legal constraints we have nothing more we can add and
we will update you accordingly.
Video games
During the period our licensing partners launched five new
games; four PC/console and one mobile. We also saw revenue from
established games that continued to perform well, many years after
launch, through a mixture of added content and continued marketing.
Particular launches of note were Darktide, Boltgun and
Tacticus.
Two new games were announced in the period including a major PC
and console strategy game, Realms of Ruin and a combat racing game,
Speed Freeks.
New games launching in 2023/24 include major titles - Realms of
Ruin and Space Marine 2. There are also the computer role playing
game Rogue Trader and digital collective card game Warpforge with
unannounced release dates. In total there are nine unreleased games
in development and two new licences were signed in the year.
As a reminder, the viability and ongoing success of any of our
licensing deals is broadly out of our control; they are reliant on
the successful development and delivery by our licensing
partners.
Sales
Reported core revenue grew by 15.1% to GBP445.4 million for the
period. On a constant currency basis, core sales were up by 9.6%
from GBP386.8 million to GBP424.0 million.
Licensing revenue from royalty income was down slightly in the
period at GBP25.4 million (2022: GBP28.0 million). This was largely
due to a high level of guarantee income on multi-year contracts
signed in the previous period; this income is recognised in full at
the inception of the contract in line with IFRS 15 'Revenue from
contracts with customers' following assessment of the performance
obligations of the contract. Reported income is split as follows:
68% PC and console games, 6% mobile and 26% other. In the period,
guarantee income was GBP8.1 million (2022: GBP15.0 million). Cash
received from licensees in the period was GBP26.5 million (2022:
GBP15.4 million).
Revenue by sales channel
52 weeks ended 52 weeks ended 52 weeks ended 52 weeks ended
28 May 2023 29 May 2022 28 May 2023 29 May 2022 2023 2022
Constant currency Constant currency Actual rates Actual rates % of core % of core
GBPm GBPm GBPm GBPm revenue revenue
------------------- ------------------ ------------------ ---------------- --------------- ---------- ----------
Trade 234.2 214.3 248.0 214.3 56% 55%
Retail 101.9 87.2 106.4 87.2 24% 23%
Online 87.9 85.3 91.0 85.3 20% 22%
------------------- ------------------ ------------------ ---------------- ---------------
Core revenue 424.0 386.8 445.4 386.8
------------------- ------------------ ------------------ ---------------- ---------------
Licensing revenue 23.3 28.0 25.4 28.0
------------------- ------------------ ------------------ ---------------- ---------------
Revenue 447.3 414.8 470.8 414.8
------------------- ------------------ ------------------ ---------------- ---------------
Trade
Trade achieved significant growth of 15.7% with growth in all
key countries. In the period, our net number of trade outlets
increased by c.300 accounts to 6,500 which helped drive forward
sales in this channel. It's worth noting that a large number of
independent retailers now also sell our products online, meaning
our customers have more choice than ever about where to buy
Warhammer. During the year we set up a sales office in Barcelona
for trade sales into Europe. This was to help mitigate staff
recruitment gaps in Nottingham, particularly in relation to
language skills.
Retail
We believe our stores are the best place to start your Warhammer
hobby journey with us. Our stores are filled with staff who have
extensive Warhammer knowledge, build local communities, and offer
Warhammer hobby guidance and support. It is an essential and unique
customer service offer that we are proud of. In the period, Retail
achieved growth of 22.0%.
Store openings and closures during the period:
Number of stores Number of stores Number of single Number of single
at 29 May 2022 Opened Closed at 28 May 2023 staff staff
stores at 28 May stores at 29 May
2023 2022
--------------- ----------------- --------- --------- ----------------- ------------------- --------------------
UK 135 - - 135 90 93
North America 165 8 1 172 145 145
Continental
Europe 151 5 2 154 113 111
Australia 49 2 2 49 37 37
Asia 18 1 3 16 14 14
--------------- ----------------- --------- --------- ----------------- ------------------- --------------------
518 16 8 526 399 400
--------------- ----------------- --------- --------- ----------------- ------------------- --------------------
In the period, we opened, including relocations, 16 stores.
After closing 8 stores, our total number of stores at the end of
the period was 526. The performance of each store will be kept
under review and any stores that do not meet our financial model
will be closed.
Our first café store in Tokyo, which opened in December 2022,
has started well and has been recruiting new customers from day
one. We are planning to open three additional Warhammer stores in
other cities across Japan in 2023/24.
Our new store openings will continue to follow our single staff
model, where appropriate. We will continue to review the format of
our stores pragmatically e.g. we monitor transaction count
carefully and add temporary staff to support the store manager when
needed. Ensuring we always recruit great store managers and offer
our customers an exceptional in-store experience, remains a
priority for us.
Online
Online sales increased by 6.7% compared to the same period last
year. As noted above, our customers have a lot of options when it
comes to shopping for Warhammer online and are able to buy our
products both through our own web stores (reported in Online) and
through those of independent retailers (reported in Trade). To
continue to be fair to our 6,500 trade partners and to ensure our
stock allocation is appropriate, we don't carry high quantities of
new release products on our own online store - so it will nearly
always sell out. We are at the final stages of completing the first
phase of upgrading our online store, putting it on a stable IT
platform. This project has been more complex than the original
review, and to be honest, it has not been delivered in our normal
joined up team Games Workshop way. The team have regrouped and it
is being delivered now in phases, the go live date of phase 1 is
under review, currently scheduled for January 2024.
Core gross margin
Core gross margin percentage declined in the period from 67.1%
to 66.5%.
Gross margin at May
2022 67.1%
Inventory provision +0.9%
Production +0.8%
Materials -0.6%
Logistics -0.7%
Animation -1.0%
Gross margin at May
2023 66.5%
Core gross margin has benefitted from a reduction in inventory
provisions as well as production efficiencies as we reduced the use
of agency staff. These have been offset by an increase in logistics
costs, as our expanded warehouse facilities came online, and we
experienced higher carriage costs, mainly in the first half of the
year. Animation relates to the costs of producing the content for
Warhammer+, the amortisation of which is reported in cost of
goods.
Operating expenses
Core operating expenses have increased by GBP20.3 million in the
period (2023: 33.2% of core revenue; 2022: 33.0%).
Operating expenses GBP127.7m
at May 2022
Staff costs +GBP8.4m
Investments +GBP3.2m
Property costs +GBP1.7m
Profit share +GBP1.6m
Other +GBP5.4m
Operating expenses GBP148.0m
at May 2023
We have invested in our staff, increasing the levels of pay to
our store staff and investing in new roles and pay levels in our
support services, as well as paying all staff more Group Profit
Share. The additional spend which we categorise as investments is
our ongoing development of the upcoming new web store and the
setting up of a new trade sales office in Barcelona. The increase
in other costs is mainly due to ongoing software support (+GBP0.9
million), travel (+GBP1.2 million), payment processing charges
(+GBP0.8 million) and marketing spend (+GBP1.1 million).
Licensing operating expenses have increased by GBP0.8 million
due to a provision put in place against a licensing receivable. In
the year we also changed the structure of the team. The team is now
more focused on quality rather than quantity.
Operating profit
Core operating profit increased by GBP16.5 million to GBP148.2
million (2022: GBP131.7 million). As a percentage of core sales,
core business operating profit was 33.3% (2022: 34.0%). On a
constant currency basis, core business operating profit increased
by GBP0.2 million to GBP131.9 million.
Licensing operating profit declined by GBP3.4 million to GBP22.0
million (2022: GBP25.4 million). On a constant currency basis,
licensing operating profit declined by GBP5.5 million to GBP19.9
million. These numbers are income less costs; they do not include
any costs related to using the IP created in the core business.
Cash generation
Cash and cash equivalents GBP71.4m
at May 2022
Net cash from operating +GBP231.7m
activities
Share issue +GBP2.6m
Other +GBP1.0m
Lease payments -GBP12.7m
Product development -GBP13.1m
Purchase of capital assets -GBP15.2m
Tax paid -GBP39.0m
Dividends paid -GBP136.5m
Cash and cash equivalents GBP90.2m
at May 2023
Included within net cash from operating activities are working
capital movements relating to a decrease in inventory purchases
of
GBP6.0 million, a decrease in trade and other receivables of
GBP8.1 million and an increase of GBP4.2 million in trade and other
payables.
Dividends
We followed our principle of returning truly surplus cash to
shareholders. Dividends of GBP136.5 million (2022: GBP77.1 million)
were declared during the period. A 'working cash buffer' of three
months' worth of working capital requirement alongside six months'
worth of tax payments has been set aside before deciding how much
cash is truly surplus for the purpose of declaring dividends.
Return on capital employed - core business
A long-term measure of our performance has been return on
capital employed (ROCE). During the year our core business return
on capital has increased from 118% to 133%. If ROCE was calculated
using the period end values, it would be 155% (2022: 113%). Core
average capital employed increased by GBP0.4 million to GBP111.7
million. Average balances are calculated over the 12 month
period.
Investments in assets
This is what we have been spending your money on:
2023 2022
GBPm GBPm
--------------------------------------- ------ ------
Shop fits for new and existing stores 1.3 1.3
Production equipment and tooling 9.3 10.1
Computer equipment and software 2.1 2.9
Site 1.9 3.4
---------------------------------------- ------ ------
Total capital additions 14.6 17.7
---------------------------------------- ------ ------
In 2022/23, we invested GBP6.7 million on moulding tools and
GBP1.8 million in tooling, milling, injection moulding and paint
machines. The investment in computer equipment and software
includes GBP1.3 million on the upgrade of our EMG warehousing
facility. The investment in Site includes GBP0.7 million on EMG and
several other projects at our HQ in Nottingham.
Inventories
Inventories have decreased by GBP5.4 million. Inventory before
inventory provisions decreased by GBP8.2 million to GBP36.6 million
(2022: GBP44.8 million). Inventory provisions, at the period end,
decreased to 9.8% of gross stock (2022: 14.3%). We continue to
offer a broad range of price points. Our average RRP increase on
miniatures in the period reported was 6% and an average of 3%
across all other product lines.
Trade and other receivables
Trade and other receivables decreased by GBP9.1 million, which
includes an GBP11.3 million decrease in VAT receivable, due to the
receipt of the outstanding European VAT balance, and a GBP3.9
million decrease in royalty income receivable. This is partially
offset by a GBP1.2 million increase in trade account debtor
balances, a GBP0.8 million increase in digital income trade
receivables and a GBP2.5 million increase in other receivables
relating to credit card receipts in transit.
Trade and other payables
Trade and other payables increased by GBP3.4 million, including
a GBP2.2 million increase in PAYE and other staff costs payable,
and a
GBP1.9 million increase in VAT liabilities. This was offset by a
GBP0.7 million decrease in deferred income mainly relating to
online sales.
Taxation
The effective tax rate for the period was 21.0% (2022: 18.0%).
The rate is higher than in the prior period as a result of the
increase in the UK corporation tax rate.
Treasury
The objective of our treasury operation is the cost effective
management of financial risk. The treasury relationships are
managed centrally and operate within a range of board approved
policies. No transactions of a speculative nature are permitted.
Credit risk on cash and short term deposits is mitigated as the
counter-parties are banks with high credit ratings assigned by
international credit agencies.
Funding and liquidity risk
The Group pays for its operations entirely from its cash
flow.
Interest rate risk
Interest income for the period was GBP1.3 million (2022: GBP0.2
million) and interest expense was GBP0.9 million (2022: GBP0.8
million).
Foreign exchange risk
The sensitivity of the Group's income statement to depreciation
in foreign exchange rates on US dollar and euro financial assets
and liabilities are disclosed below. An appreciation of the stated
currencies would have an equal and opposite effect:
Income statement losses
2023
GBPm
15% depreciation of the
US dollar 5.9
15% depreciation of the
euro 0.9
Our main currency exposures are in respect of the euro and US
dollars. The rates used for these throughout the accounts are:
euro US dollar
2023 2022 2023 2022
Period end rate used for the balance
sheet 1.15 1.18 1.23 1.26
Average rate used for earnings 1.15 1.18 1.20 1.34
Risks and uncertainties
The board has overall responsibility for ensuring risk is
appropriately managed across the Group and has carried out a robust
assessment of the principal risks to the business. Our operational
risks, including emerging risks, are identified and monitored
through discussions at regular risk meetings of the senior
management team. These meetings are coordinated by the internal
audit function and assess the impact of each operational risk as
well as identifying new emerging risks and mitigating actions
required. The output of this process is considered and reviewed by
the audit and risk committee twice yearly.
The key strategic risks to the Group are regularly reviewed by
the board. The principal strategic risks identified in 2022/23 are
discussed below. These risks are not intended to be an extensive
analysis of all risks that may arise but more importantly are the
ones which we believe could cause business interruption.
-- IT strategy and delivery - with a number of significant
business projects in play, all of which are dependent on IT
support, there is a requirement for a robust IT strategy which
enables us to deliver key strategic projects as well as supporting
day to day activities. We are actively supporting our global head
of IT in investing in the structure of his team to ensure the IT
support needs of the business can be delivered. We have appointed a
new non-executive director, Mark Lam, with many years of
operational and strategic IT experience to help management review
their strategies and operational plans.
-- Media - whilst this remains an area for future growth, it is
imperative that exploitation of our IP through media channels does
no harm to our core business. Our IP steering team meets every
month to discuss ongoing and future exploitation, to ensure that
all use of our IP, through all channels, is approved, correct and
consistent. It is fully supported by our in-house legal team who
will act when needed. The operational board meets quarterly to
review progress and current status of all licensing projects.
In addition to this, we have a number of additional operational
risks but we do not consider these to be principal strategic
risks.
Priorities for 2023/24
We are making progress with our key priorities. Each of these is
designed to ensure we deliver our exciting operational plan and
continue to engage and inspire our loyal customers and attract new
ones.
As part of our overall strategy, six key initiatives will be
prioritised in 2023/24. These are designed to deliver further sales
growth whilst maintaining our core operating profit margin and
continuing to surprise and delight our customers. They are in
addition to our investment in new product quality and ensuring our
new factories and warehouses deliver the appropriate cash
payback.
Staff training and development
We care passionately about our global team. We have ambitious
long-term plans, but we also run the business with only the
resources we need. We will continue to recruit essential new jobs
or where we need to back-fill positions. Like last year, many of
these recruits will be in order to scale - in our factories and
warehouse facilities as well as in our support functions, mainly
IT.
We will continue to support lifelong learning and training to
develop the skills needed to enable all our staff to be successful.
We are also more active in developing orderly succession plans of
both the board and senior management. We continue in our commitment
to diversity and inclusion at Games Workshop.
Growth
We are planning to add a further 30 new stores: 16 in North
America, 11 in Europe and 3 in Japan.
We again aim to grow in every major country in the world, and
via all of our three sales channels with all of our core IP. Our
online store will have a new platform and will be rebranded for
launch in 2023/24. Phase one will have no major bells or whistles
but will be a more stable technical solution. We look forward to
more hobbyists signing up to My Warhammer, the gateway into our
fantasy worlds.
We will continue to open more independent retailer accounts.
Selling via physical outlets remains an important sales channel for
us. Some have their own online store, some not. We have seen sales
grow in both.
We will continue to search for and engage with hobbyists
everywhere.
Customer focused
We will also continue to be customer focused - engaging better
with our existing customers and reaching whole new audiences with
the Warhammer hobby, and the rich worlds it is set within.
Social responsibility
We are committed to ethical sourcing and staff wellbeing,
diversity and inclusion. We will be collecting and reporting
internally the ethnicity of our staff and we will track trends.
Committed to diversity, we will continue to performance manage and
recruit for the personal qualities needed to do a particular job as
well as the necessary skills. I will continue to do my best to
ensure this is the case and that we are fair and free from any bias
and/or prejudice.
Sustainability - climate change
We will continue our work on reducing our carbon footprint in
line with our plan and explain how we are doing against those
goals.
Licensing business
The priority remains the same to deliver on our strategy by
licensing our IP to partners who will successfully launch high
quality video games, live action or animation shows.
Outlook
We finished the year having delivered eight consecutive years of
Group sales and profit growth - in the period we reported the
highest level of sales and the most profit we have generated since
flotation 29 years ago. As for the future, in our 30th year we will
continue to focus on product quality - in June 2023 we launched the
best Warhammer 40,000 range of miniatures in our history... we wait
to see if our hobbyists like them as much as we do. Our
international team has been sensational again, thanks to you
all.
Approved by the board, and signed on behalf of the board
Kevin Rountree
CEO
24 July 2023
Statement of directors' responsibilities
The directors confirm that this condensed consolidated financial
information has been prepared in accordance with international
accounting standards in conformity with the requirements of the
Companies Act 2006 and UK-adopted International Accounting
Standards and that the management report herein includes a true and
fair review of the information required by DTR 4.2.7 and DTR 4.2.8,
namely:
-- an indication of important events that have occurred during
the period and their impact on the condensed financial information,
and a description of the principal risks and uncertainties; and
-- material related-party transactions in the period and any
material changes in the related-party transactions described in the
last annual report.
A list of all current directors is maintained on the investor
relations website at investor.games-workshop.com .
By order of the board
Kevin Rountree Rachel Tongue
CEO CFO
25 July 2023
CONSOLIDATED INCOME STATEMENT
52 weeks 52 weeks
ended ended
28 May 29 May 2022
2023 GBPm
Notes GBPm
------------------------------------- ------------ ------- ----------- ------ --------------
Core revenue 445.4 386.8
Licensing revenue 25.4 28.0
Revenue 3 470.8 414.8
Cost of sales (149.2) (127.4)
------------------------------------- ------------ ------- ----------- ------ --------------
Core gross profit 296.2 259.4
Licensing gross profit 25.4 28.0
------------------------------------- ------------ ------- ----------- ------ --------------
Gross profit 321.6 287.4
Operating expenses 3 (151.4) (130.3)
------------------------------------- ------------ ------- ----------- ------ --------------
Core operating profit 148.2 131.7
Licensing operating profit 22.0 25.4
------------------------------------- ------------ ------- ----------- ------ --------------
Operating profit 170.2 157.1
Finance income 1.3 0.2
Finance costs (0.9) (0.8)
------------------------------------- ------------ ------- ----------- ------ --------------
Profit before taxation 170.6 156.5
Income tax expense 4 (35.9) (28.1)
------------------------------------- ------------ ------- ----------- ------ --------------
Profit attributable to owners of
the parent 134.7 128.4
------------------------------------- ------------ ------- ----------- ------ --------------
Earnings per share for profit attributable to the owners of the parent
during the period (expressed in pence per share):
52 weeks 52 weeks
Notes ended ended
28 May 29 May 2022
2023
Basic earnings per ordinary share 5 409.7p 391.3p
Diluted earnings per ordinary share 5 409.4p 390.6p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
52 weeks
ended 52 weeks
29 May ended
2022 29 May 2022
Notes GBPm GBPm
----------------------------------------- --------- --------- -------------
Profit attributable to owners of
the parent 134.7 128.4
Other comprehensive income
Exchange (losses)/gains on translation
of foreign operations (1.5) 0.8
Other comprehensive income for the
period (1.5) 0.8
----------------------------------------------------- --------- -------------
Total comprehensive income attributable
to owners of the parent 133.2 129.2
----------------------------------------------------- --------- -------------
All items disclosed in the statements of comprehensive income
will not be reclassified to the income statement.
The following notes form an integral part of this condensed
consolidated financial information.
CONSOLIDATED BALANCE SHEET
28 May 29 May
Notes 2023 2022
GBPm GBPm
---------------------------------- -------- ------- -------
Non-current assets
Goodwill 1.4 1.4
Other intangible assets 7 21.2 25.6
Property, plant and equipment 8 55.7 55.0
Right-of-use assets 9 48.9 48.1
Deferred tax assets 12.0 17.8
Non-current receivables 13.6 19.4
---------------------------------- -------- ------- -------
152.8 167.3
---------------------------------- -------- ------- -------
Current assets
Inventories 33.0 38.4
Trade and other receivables 36.3 39.6
Current tax assets 14.5 4.4
Cash and cash equivalents 10 90.2 71.4
---------------------------------- -------- ------- -------
174.0 153.8
---------------------------------- -------- ------- -------
Total assets 326.8 321.1
---------------------------------- -------- ------- -------
Current liabilities
Lease liabilities (9.9) (9.2)
Trade and other payables (37.0) (33.5)
Current tax liabilities (0.4) (1.1)
Provisions for other liabilities
and charges 11 (0.9) (0.8)
---------------------------------- -------- ------- -------
(48.2) (44.6)
---------------------------------- -------- ------- -------
Net current assets 125.8 109.2
---------------------------------- -------- ------- -------
Non-current liabilities
Lease liabilities (40.0) (39.7)
Other non-current liabilities (0.5) (0.6)
Deferred tax liabilities (1.4) -
Provisions for other liabilities
and charges (1.6) (1.5)
---------------------------------- -------- ------- -------
(43.5) (41.8)
---------------------------------- -------- ------- -------
Net assets 235.1 234.7
---------------------------------- -------- ------- -------
Capital and reserves
Called up share capital 1.6 1.6
Share premium account 18.9 16.3
Other reserves 1.4 2.9
Retained earnings 213.2 213.9
---------------------------------- -------- ------- -------
Total equity 235.1 234.7
---------------------------------- -------- ------- -------
The following notes form an integral part of this condensed
consolidated financial information.
CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY
Called
up Share
share premium Other Retained Total
capital account reserves earnings equity
GBPm GBPm GBPm GBPm GBPm
---------------------------------------- --------- --------- ---------- ---------- --------
At 30 May 2021 and 31 May 2021 1.6 14.5 2.1 178.1 196.3
Profit for the 52 weeks to 29
May 2022 - - - 128.4 128.4
Exchange differences on translation
of foreign operations - - 0.8 - 0.8
Total comprehensive income for
the period - - 0.8 128.4 129.2
Transactions with owners:
Share-based payments - - - 1.6 1.6
Shares issued under employee sharesave
scheme - 1.8 - - 1.8
Deferred tax credit relating to
share options - - - (1.4) (1.4)
Current tax credit relating to
exercised share options - - - 0.7 0.7
Dividends declared and paid to
Company shareholders - - - (93.5) (93.5)
---------------------------------------- --------- --------- ---------- ---------- --------
Total transactions with owners - 1.8 - (92.6) (90.8)
At 29 May 2022 and 30 May 2022 1.6 16.3 2.9 213.9 234.7
Profit for the 52 weeks to 28
May 2023 - - - 134.7 134.7
Exchange differences on translation
of foreign operations - - (1.5) - (1.5)
Total comprehensive income for
the period - - (1.5) 134.7 133.2
Transactions with owners:
Share-based payments - - - 1.0 1.0
Shares issued under employee sharesave
scheme - 2.6 - - 2.6
Deferred tax debit relating to
share options - - - (0.2) (0.2)
Current tax credit relating to
exercised share options - - - 0.3 0.3
Dividends paid to Company shareholders - - - (136.5) (136.5)
Total transactions with owners - 2.6 - (135.4) (132.8)
At 28 May 2023 1.6 18.9 1.4 213.2 235.1
---------------------------------------- --------- --------- ---------- ---------- --------
The following notes form an integral part of this condensed
consolidated financial information.
CONSOLIDATED CASH FLOW STATEMENT
52 weeks 52 weeks
ended ended
Notes 28 May 29 May
2023 2022
GBPm GBPm
---------------------------------------- -------- --------- ---------
Cash flows from operating activities
Cash generated from operations 13 231.7 159.2
UK corporation tax paid (31.3) (34.0)
Overseas tax paid (7.7) (3.7)
---------------------------------------- -------- --------- ---------
Net cash generated from operating
activities 192.7 121.5
---------------------------------------- -------- --------- ---------
Cash flows from investing activities
Purchases of property, plant and
equipment (14.8) (17.0)
Purchases of other intangible assets (0.4) (1.4)
Expenditure on product development (13.1) (13.9)
Interest received 1.2 0.2
---------------------------------------- -------- --------- ---------
Net cash used in investing activities (27.1) (32.1)
---------------------------------------- -------- --------- ---------
Cash flows from financing activities
Proceeds from issue of ordinary
share capital 2.6 1.8
Repayment of principal under leases (11.8) (11.1)
Lease interest paid (0.9) (0.8)
Dividends paid to Company shareholders (136.5) (93.5)
---------------------------------------- -------- --------- ---------
Net cash used in financing activities (146.6) (103.6)
---------------------------------------- -------- --------- ---------
Net increase/(decrease) in cash
and cash equivalents 19.0 (14.2)
Opening cash and cash equivalents 71.4 85.2
Effects of foreign exchange rates
on cash and cash equivalents (0.2) 0.4
---------------------------------------- -------- --------- ---------
Closing cash and cash equivalents 90.2 71.4
---------------------------------------- -------- --------- ---------
The following notes form an integral part of this condensed
consolidated financial information.
NOTES TO THE FINANCIAL INFORMATION
1. General information
The consolidated financial information of Games Workshop Group
PLC is prepared under the going concern basis and in accordance
with both international accounting standards in conformity with the
requirements of the Companies Act 2006 and UK-adopted International
Accounting Standards.
The financial information set out above does not constitute the
company's statutory accounts for the periods ended 28 May 2023 or
29 May 2022 but is derived from those accounts. Statutory accounts
for 2022 have been delivered to the registrar of companies, and
those for 2023 will be delivered in due course. The auditors have
reported on those accounts; their reports were (i) unqualified,
(ii) did not include a reference to any matters to which the
auditors drew attention by way of emphasis without qualifying their
reports and (iii) did not contain a statement under section 498 (2)
or (3) of the Companies Act 2006. Copies will also be available
from Ross Matthews, Games Workshop Group PLC, Willow Road, Lenton,
Nottingham, NG7 2WS. This information is also available on the
Company's website at http://investor.games-workshop.com.
The annual general meeting will be held at Willow Road, Lenton,
Nottingham, NG7 2WS at 10am on 20 September 2023.
The annual financial report is prepared in accordance with the
Listing Rules and Disclosure and Transparency Rules of the
Financial Conduct Authority and accounting policies consistent with
those used in the 2023 annual report.
The preparation of the consolidated financial information
requires management to make estimates and assumptions that affect
the reported amounts of revenues, expenses, assets and liabilities,
and disclosure of contingencies at the balance sheet date. If in
future such estimates and assumptions, which are based on
management's best judgement at the date of the consolidated
financial information, deviate from actual circumstances, the
original estimates and assumptions will be modified, as
appropriate, in the period in which the circumstances change.
Management do not consider there to be any critical accounting
estimates or judgements that have a significant risk of causing a
material adjustment to the carrying amounts of assets and
liabilities within the next financial period.
2. Changes in accounting policies
The Group considers that there are no new accounting standards,
amendments or interpretations issued by the IASB, but not yet
applicable, which have had, or are expected to have a significant
effect on the financial information.
3. Segment information
As Games Workshop is a vertically integrated business,
management assesses the performance of sales channels and
manufacturing and distribution channels separately. Share-based
payment charges and Group Profit Share Scheme charges to employees
have all been included in core operating expenses.
At 28 May 2023 Games Workshop has two segments, core and
licensing:
- Core: the core segment includes all revenue and expenditure
relating to the design, manufacture and sales of our fantasy
miniatures and related products. It also includes the revenue and
expenditure related to Warhammer+.
- Licensing: the licensing segment includes all revenue and
expenditure relating to licences granted to external partners.
We provide further information on revenue and expenses within
the core segment below. The core segment has been divided into
channels as follows:
- Trade: this sales channel sells globally to independent
retailers, agents and distributors. It also includes the Group's
magazine newsstand business and the distributor sales from the
Group's publishing business (Black Library).
- Retail: this includes sales through the Group's retail stores,
the Group's visitor centre in Nottingham and global events.
- Online: this includes sales through the Group's global web
stores, our online subscription service (Warhammer+) and digital
sales through external affiliates.
- Design, manufacturing, logistics and operations, which includes costs for:
- the design studio (that creates all of the IP and the
associated miniatures, artwork, games and publications);
- the production facilities;
- the warehouses and logistics costs;
- charges for inventory provisions. This includes adjustments
for the profit in stock arising from inter-segment sales;
- support services (marketing, IT, accounting, payroll,
personnel, procurement, legal, health and safety, customer services
and credit control) provided to activities across the Group;
- Group: this includes the Company's overheads
The chief operating decision-maker, identified as the executive
directors, assesses the performance of each segment based on
segmental operating profit. This has been reconciled to the Group's
total profit before taxation below.
Core Licensing Total
---------------------------------------- ------------------ ------------------- ------------------
2023 2022 2023 2022 2023 2022
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------------- -------- -------- --------- -------- -------- --------
Trade 248.0 214.3 - - 248.0 214.3
Retail 106.4 87.2 - - 106.4 87.2
Online 91.0 85.3 - - 91.0 85.3
Licensing - - 25.4 28.0 25.4 28.0
Revenue 445.4 386.8 25.4 28.0 470.8 414.8
---------------------------------------- -------- -------- --------- -------- -------- --------
Cost of sales (149.2) (127.4) - - (149.2) (127.4)
Gross Profit 296.2 259.4 25.4 28.0 321.6 287.4
Trade (11.8) (10.7) - - (11.8) (10.7)
Retail (61.7) (52.4) - - (61.7) (52.4)
Online (15.6) (11.7) - - (15.6) (11.7)
Design, manufacturing, logistics
and operations (41.4) (37.6) - - (41.4) (37.6)
Licensing - - (3.4) (2.6) (3.4) (2.6)
Group (4.9) (3.8) - - (4.9) (3.8)
Share-based payment charge (1.0) (1.6) - - (1.0) (1.6)
Profit share scheme and discretionary
payment charge (11.6) (9.9) - - (11.6) (9.9)
---------------------------------------- -------- -------- --------- -------- -------- --------
Operating expenses (148.0) (127.7) (3.4) (2.6) (151.4) (130.3)
---------------------------------------- -------- -------- --------- -------- -------- --------
Operating profit 148.2 131.7 22.0 25.4 170.2 157.1
Finance income 1.3 0.2 - - 1.3 0.2
---------------------------------------- -------- -------- --------- -------- -------- --------
Finance costs (0.9) (0.8) - - (0.9) (0.8)
---------------------------------------- -------- -------- --------- -------- -------- --------
Profit before tax 148.6 131.1 22.0 25.4 170.6 156.5
---------------------------------------- -------- -------- --------- -------- -------- --------
Additional revenue analysis
Segment revenue and segment profit include transactions between
business segments; these transactions are eliminated on
consolidation. Sales between segments are carried out at arm's
length. The revenue from external parties reported to the executive
directors is measured in a manner consistent with that in the
income statement. Sales regions analysed within the segments
reported to the executive directors differ from the analysis of
sales by customer geography, due to the categorisation of some
European and Asian customers. For information, core external
revenue is analysed further below:
52 weeks 52 weeks
ended ended
28 May 29 May
2023 2022
GBPm GBPm
----------------------------- --------- ---------
Trade
UK and Continental Europe 105.0 90.4
North America 112.8 96.5
Australia and New Zealand 14.3 11.4
Asia 10.4 8.5
Rest of world 3.4 5.9
Black Library 2.1 1.6
-------------------------------- --------- ---------
Total Trade 248.0 214.3
-------------------------------- --------- ---------
Retail
UK 32.1 25.7
Continental Europe 21.1 18.5
North America 41.0 33.6
Australia and New Zealand 9.4 7.3
Asia 2.8 2.1
-------------------------------- --------- ---------
Total Retail 106.4 87.2
-------------------------------- --------- ---------
Online
UK 16.2 19.0
Continental Europe 15.6 16.3
North America 35.7 31.4
Australia and New Zealand 4.1 4.4
Asia 0.6 0.4
Rest of world 1.0 1.4
Digital 17.8 12.4
-------------------------------- --------- ---------
Total Online 91.0 85.3
-------------------------------- --------- ---------
Total external core revenue 445.4 386.8
-------------------------------- --------- ---------
External core revenue analysed by customer geographical location
is as follows:
53 weeks 52 weeks
ended ended
28 May 29 May 2022
2023 GBPm
GBPm
--------------------------- --------- -------------
UK 97.2 83.4
Continental Europe 104.8 95.6
North America 197.4 169.7
Australia and New Zealand 28.9 23.3
Asia 14.7 11.8
Rest of world 2.4 3.0
------------------------------ --------- -------------
External core revenue 445.4 386.8
------------------------------ --------- -------------
The Group is not reliant on any one individual customer.
Additional operating expenses analysis
Operating profit as reported above includes impairment, depreciation
and amortisation charges as follows:
52 weeks 52 weeks
ended ended
28 May 29 May
2023 2022
GBPm GBPm
--------------------------------------------------------- ------------- ---------
Trade 0.1 -
Retail 11.4 11.0
Online 3.0 2.8
Design, manufacturing, logistics and
operations 28.6 22.2
Total group charges for impairment,
depreciation and amortisation 43.1 36.0
------------------------------------------------------------ ------------- ---------
Non-current asset analysis
Non-current assets (excluding deferred tax and non-current
financial instruments) located within the UK were GBP95.2m (2022:
GBP120.6m) and all other countries were GBP32.0m (2022: GBP28.9m).
Tangible, intangible and right-of-use asset additions included
within the UK were GBP26.8m (2022: GBP34.5m) and all other
countries were GBP13.6m (2022: GBP9.0m).
Other non-cash charges
Other non-cash charges and significant costs included in
operating profit are as follows:
Redundancy costs
Charge to inventory and compensation
provisions for loss of office
52 weeks 52 weeks 52 weeks 52 weeks
ended ended ended ended
28 May 2023 29 May 2022 28 May 29 May 2022
GBPm GBPm 2023 GBPm
GBPm
------------------------------ ------------- ------------------ --------- -------------
Core (8.0) (10.6) (0.7) (0.5)
Licensing - - (0.4) (0.1)
Total group charge (8.0) (10.6) (1.1) (0.6)
------------------------------- ------------- ------------------ --------- -------------
4. Taxation
52 weeks 52 weeks
ended ended
28 May 29 May 2022
2023 GBPm
GBPm
----------------------------------------------------------- --------- -------------
Current UK taxation:
* UK corporation tax on profits for the period 25.1 31.3
Adjustments to tax charge in respect
of prior periods 0.6 (0.4)
-------------------------------------------------------------- --------- -------------
25.7 30.9
Current overseas taxation:
* Overseas corporation tax on profits for the period 3.6 4.3
Adjustments to tax charge in respect
of prior periods (0.9) 0.8
-------------------------------------------------------------- --------- -------------
Total current taxation 28.4 36.0
-------------------------------------------------------------- --------- -------------
Deferred taxation:
Origination and reversal of timing
differences 6.4 (7.3)
Adjustments to tax charge in respect
of prior periods 1.1 (0.6)
-------------------------------------------------------------- --------- -------------
Tax expense recognised in the
income statement 35.9 28.1
-------------------------------------------------------------- --------- -------------
Current tax credit relating to
sharesave scheme (0.3) (0.7)
Deferred tax debit relating to
sharesave scheme 0.2 1.4
-------------------------------------------------------------- --------- -------------
(Credit)/debit taken directly
to equity (0.1) 0.7
-------------------------------------------------------------- --------- -------------
The tax on the Group's profit before taxation differs in both
periods presented from the standard rate of corporation tax in the
UK as follows:
52 weeks 52 weeks
ended ended
28 May 29 May 2022
2023 GBPm
GBPm
-------------------------------------------------- --------- -------------
Profit before taxation 170.6 156.5
----------------------------------------------------- --------- -------------
Profit before taxation multiplied by a blended
rate of corporation tax in the UK of 20% (2022:
19%) 34.1 29.7
Effects of:
Items not assessable for tax purposes (0.4) (1.3)
Different tax rates on overseas
earnings 0.9 (1.1)
Tax rate changes 0.5 1.0
Adjustments to tax charge in respect
of prior periods 0.8 (0.2)
----------------------------------------------------- --------- -------------
Total tax charge for the period 35.9 28.1
----------------------------------------------------- --------- -------------
The UK corporation tax rate increased from 19% to 25% from 1
April 2023. This change had been substantively enacted at 29 May
2022 and is therefore reflected in this condensed consolidated
financial information.
Items not assessable for tax purposes include the UK's super
deduction for fixed asset additions as well as tax relief for other
taxes paid.
5. Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to owners of the parent by the weighted average number
of ordinary shares in issue during the period.
52 weeks 52 weeks
ended ended
28 May 29 May 2022
2023
------------------------------------- --------- -------------
Profit attributable to owners of
the parent (GBPm) 134.7 128.4
---------------------------------------- --------- -------------
Weighted average number of ordinary
shares in issue (thousands) 32,881 32,813
---------------------------------------- --------- -------------
Basic earnings per share (pence
per share) 409.7 391.3
---------------------------------------- --------- -------------
Diluted earnings per share
The calculation of diluted earnings per share has been based on
the profit attributable to owners of the parent and the weighted
average number of shares in issue throughout the period, adjusted
for the dilutive effect of share options outstanding at the period
end.
52 weeks 52 weeks
ended ended
28 May 29 May 2022
2023
--------------------------------------------- --------- -------------
Profit attributable to owners of
the parent (GBPm) 134.7 128.4
------------------------------------------------ --------- -------------
Weighted average number of ordinary
shares in issue (thousands) 32,881 32,813
Adjustment for share options (thousands) 17 60
------------------------------------------------ --------- -------------
Weighted average number of ordinary shares
for diluted earnings per share (thousands) 32,898 32,873
----------------------------------------------- --------- -------------
Diluted earnings per share (pence
per share) 409.4 390.6
------------------------------------------------ --------- -------------
6. Dividends per share
Dividends of GBP29.6m (90 pence per share), GBP9.8m (30 pence
per share), GBP14.8m (45 pence per share), GBP42.8m (130 pence per
share) and GBP39.5m (120 pence per share) were declared and paid
during the current period.
Dividends of GBP13.1m (40 pence per share), GBP8.2m (25 pence
per share), GBP11.5m (35 pence per share), GBP21.3m (65 pence per
share) and GBP23.0m (70 pence per share) were declared and paid
during the prior period. Dividends of GBP16.4m (50 pence per share)
were declared during the period ended 30 May 2021 and paid during
the period ended 29 May 2022.
As a result of a procedural oversight, 2 pence per share of the
dividend paid on 25 November 2022 was classed as an unlawful
dividend. Although the Company always had sufficient reserves to
pay this dividend at the time it was made, the Companies Act 2006
requires this to be demonstrated by reference to interim accounts
filed at Companies House prior to payment. Those interim accounts,
however, were not filed with Companies House until after the
relevant dividend had been paid and after the lapse had been
identified. No fines or penalties have been incurred by the
Company. Please see resolution 15 tabled in the notice of meeting
for the annual general meeting ('AGM').
7. Other intangible assets
2023 2022
GBPm GBPm
------------------------------------------ ------- -------
Net book value at the beginning
of the period 25.6 23.7
Exchange differences - 0.1
Additions 13.5 15.3
Disposals (0.2) (0.3)
Reclassifications (0.2) (0.2)
Amortisation charge (13.9) (11.7)
Impairment (3.6) (1.3)
-------------------------------------------- ------- -------
Net book value at the end of
the period 21.2 25.6
-------------------------------------------- ------- -------
8. Property, plant and equipment
2023 2022
GBPm GBPm
------------------------------------------ ------- -------
Net book value at the beginning
of the period 55.0 49.8
Exchange differences 0.1 0.5
Additions 14.2 16.3
Disposals (0.1) (0.1)
Reclassifications 0.2 0.2
Depreciation charge (13.7) (11.7)
Net book value at the end of
the period 55.7 55.0
-------------------------------------------- ------- -------
9. Right-of-use assets
2023 2022
GBPm GBPm
------------------------------------------ ------- -------
Net book value at the beginning
of the period 48.1 46.0
Exchange differences 0.1 1.4
Additions 12.7 11.9
Disposals (0.1) -
Depreciation charge (11.9) (11.2)
Net book value at the end of
the period 48.9 48.1
-------------------------------------------- ------- -------
10. Cash and cash equivalents
Cash and cash equivalents include the following for the purposes
of the cash flow statement:
2023 2022
GBPm GBPm
------------------------------------ ------ ------
Cash at bank and in hand 90.2 71.4
Cash and cash equivalents 90.2 71.4
-------------------------------------- ------ ------
11. Provisions for other liabilities and charges
Analysis of total provisions:
2023 2022
GBPm GBPm
------------------------------------------------- ---------- ----------- --------
Current 0.9 0.8
Non-current 1.6 1.5
-------------------------------------------------- ---------- ----------- --------
Total provisions for other liabilities
and charges 2.5 2.3
-------------------------------------------------- ---------- ----------- --------
Employee
benefits Property Total
GBPm GBPm GBPm
------------------------------------------------- ---------- ----------- --------
At 29 May 2022 and 30 May 2022 1.8 0.5 2.3
Charged to the income statement:
* Additional provisions 0.4 - 0.4
Utilised (0.2) - (0.2)
-------------------------------------------------- ---------- ----------- --------
At 28 May 2023 2.0 0.5 2.5
-------------------------------------------------- ---------- ----------- --------
12. Commitments
Capital expenditure contracted for at the balance sheet date but
not yet incurred is GBP3.8m (2022: GBP4.3m). Inventory purchase
commitments contracted for at the balance sheet date are GBP7.4m
(2022: GBP6.7m).
13. Reconciliation of profit to net cash from operating
activities
2023 2022
GBPm GBPm
----------------------------------------------- ------ -------
Profit before taxation 170.6 156.5
Finance income (1.3) (0.2)
Finance costs 0.9 0.8
Operating profit 170.2 157.1
Depreciation of property, plant and equipment 13.7 11.7
Depreciation of right-of-use assets 11.9 11.4
Net impairment charge of intangible
assets 3.6 1.3
Loss on disposal of intangible
assets 0.2 0.3
Loss on disposal of right-of-use-assets 0.1 -
Loss on disposal of property, 0.1 -
plant and equipment
Amortisation of capitalised development
costs 12.1 10.1
Amortisation of other intangibles 1.8 1.6
Exchange movement (1.6) -
Share-based payments 1.0 1.6
Changes in working capital:
- Decrease/(increase) in inventories 6.0 (12.2)
- Decrease/(increase) in trade
and other receivables 8.1 (21.5)
- Increase/(decrease) in trade
and other payables 4.2 (2.2)
- Increase in provisions 0.3 -
----------------------------------------------- ------ -------
Net cash from operating activities 231.7 159.2
------------------------------------------------- ------ -------
GLOSSARY
Alternative Performance Measures (APMs)
Closest
APM equivalent Reconciliation to closest IFRS measure
definitions IFRS measure where applicable
------------ -------------------- ----------------------------------------------------------------------------------------------
Core Revenue Core revenue is reconciled to revenue
revenue in note 3 to the financial statements.
Direct
sales made
of
our core
products to
external
customers,
through the
Group's
network of
retail
stores,
independent
retailers
and online
through the
global web
stores
Core gross Gross profit Core gross profit is reconciled to gross
profit profit in note 3 to the financial statements.
Core gross
profit is
core
revenue
less all
related
cost of
sales
Core Operating Core operating expenses are reconciled
operating expenses to operating expenses in note 3 to the
expenses financial statements.
Operating
expenses
relating
to the core
business
of selling
directly
to external
customers
Core Operating Core operating profit is reconciled
operating profit to operating profit in note 3 to the
profit financial statements.
Core
operating
profit
is core
revenue
less
all related
cost of
sales and
operating
expenses
------------ -------------------- ----------------------------------------------------------------------------------------------
Licensing Revenue Licensing revenue is reconciled to revenue
revenue in note 3 to the financial statements.
Income
relating to
royalties
earned from
third party
licensees
Licensing Gross profit Licensing gross profit is reconciled
gross to gross profit in note 3 to the financial
profit statements.
Licensing
gross
profit
is
licensing
revenue
less any
related
cost
of sales
------------ -------------------- ----------------------------------------------------------------------------------------------
Licensing Operating Licensing operating expenses are reconciled
operating expenses to operating expenses in note 3 to the
expenses financial statements.
Operating
expenses
relating
to the
licensing
segments
Licensing Operating Licensing operating profit is reconciled
operating profit to operating profit in note 3 to the
profit financial statements.
Licensing
operating
profit is
licensing
revenue
less all
related
cost of
sales and
operating
expenses
------------ -------------------- ----------------------------------------------------------------------------------------------
Revenue at Revenue These are calculated by converting underlying
constant revenue, core operating profit and licensing
currency operating profit amounts at local currency
values for the current period at the
prior period average exchange rate.
Core Operating
operating profit
profit
at constant
currency
Licensing Operating
operating profit
profit at
constant
currency
Amounts for
current
and prior
periods,
stated
at a
constant
exchange
rate.
2023 2022
Actual Impact Constant Actual
of FX currency
------- ------- ---------- -------
Revenue 470.8 (23.5) 447.3 414.8
Core operating profit 148.2 (16.3) 131.9 131.7
Licensing operating profit 22.0 (2.1) 19.9 25.4
----------------------------------------------------------------------------------------------------------------------------------
Core None This value is calculated by taking monthly
average net assets and adjusting for any cash,
capital borrowings, licensing receivables, exceptional
employed provisions, taxation and dividends,
This is a for each of the 12 months. These are
measure of then added together and divided by 12
the capital to give the core average capital employed. 12 month
employed average
in the core 2023 2022
business GBPm GBPm
averaged Net assets 257.4 228.5
over a 12 Cash (105.3) (87.0)
month Licensing receivables (22.5) (20.2)
period Taxation (17.9) (10.0)
------------------------------- -------- -------
Core average capital employed 111.7 111.3
------------------------------- -------- -------
------------ -------------------- ----------------------------------------------------------------------------------------------
Return on None Return is a percentage calculated by
capital dividing the core operating profit (2023:
employed GBP148.2m, 2022: GBP131.7m) by the core
(ROCE) average capital employed (2023: GBP111.7m,
Measure of 2022: GBP111.3m).
the profit
relative to
the amount
of capital
employed.
The higher
the ROCE,
the greater
the return
for the
capital
employed
Cash Net Net increase in cash-pre dividends paid
generated - increase/(decrease) can be calculated by taking the net
pre in cash increase/(decrease) in cash and cash
dividends and cash equivalents (2023: GBP19.0m, 2022: (GBP14.2m))
paid equivalents and adding back the dividends which
Movement in have been paid in the period (2023:
cash in GBP136.5m, 2022: GBP93.5m).
the period
before any
payments of
dividends
are taken
into
account
------------ -------------------- ----------------------------------------------------------------------------------------------
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END
FR FFFEIDAISFIV
(END) Dow Jones Newswires
July 25, 2023 02:00 ET (06:00 GMT)
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